Economy minister says Spain will not seek financial aid: report

By IBT Staff Reporter12/05/10 AT 4:24 PM

Spain's economic fundamentals are sound and the country will not appeal for financial support from the international aid mechanism, Spanish Economy Minister Elena Salgado said in an interview published on Sunday.

Spain announced a range of deficit cutting measures on Friday as it fought to reduce a high budget shortfall, calm investor nerves over its credit-worthiness and shake off concerns that it could need a financial bailout.

Bond markets have been punishing Spanish sovereign debt over concerns Spain will not be able to cut its deficit, although its relative cost of borrowing has pulled back from record highs on reports of the European Central buying its bonds.

No. None of our fundamentals justify it, Salgado told French business daily Les Echos when asked if Spain would appeal for a financial bailout from the European Union and other lenders.

The minister has called for systemic reform to deal with the debt crisis, whose spread to Spain would likely exhaust the rescue funds set aside by the euro zone to deal with it.

But she said that increasing the size of the European Stability Fund designed to extend aid to member states in financial difficulty was not the question for the moment. Today, we need to show clarity, determination and coordination.

Markets need to know that European institutions and countries will do everything to ensure the stability of the euro, she added.

Spain's public deficit stood at 11.1 percent of gross domestic product in 2009 and analysts have long warned extra measures would be needed beyond an austere 2011 budget and promised labor market reforms to bring it down.

Salgado said that Spain's property crisis, a source of worry for investors concerned about the health of Spanish lenders, was over and that the country would meet its official full-year 2011 growth target of 1.3 percent.

We think we will be able to maintain our forecast. We think there is room (for growth) in private consumption, she said.